Is the UK’s internet infrastructure strangling SMEs?

28-Sep-2016

The latest research from the Cloud Industry Forum (CIF) shows the overall cloud adoption rate in the UK now stands at 84%, with almost four in five (78%) of cloud users having adopted two or more cloud services.

This in part reflects the fact that many more software applications are available in a cloud format from basic Microsoft applications and simple storage such as Dropbox through CRM solutions such as Salesforce to much larger Citrix and ERP solutions. This trend has led to a massive amount of data being held in the cloud.

However, Dave Millett of independent telecoms brokerage Equinox is concerned that internet speeds in the UK are just not up to the job of storing so much business data in the cloud. The more data you have to access in the cloud and the more processing that is not happening on a local server then the greater broadband speed and capacity you need.

The table below shows how average internet speeds have changed over the past three years

However, that picture hides a great variety. It includes all the domestic superfast cable connections from Virgin etc. If you don’t have fibre broadband, just old fashion ADSL (copper based broadband), the current average speed falls to just 8 mbps down and 0.8 upstream. In many rural areas it will be a lot slower, as it will in those parts of the country which are predominantly business, not residential, i.e. city centres and business parks – where fibre is often not available, and 100s of companies are pulling on the connection.

This is less of an issue for large enterprises that will generally have big data connections, but for SMEs it is much more complex.

For example, we worked with a small accountancy firm near Victoria station in London. They had moved their Citrix systems to the cloud. As they expanded they suffered increasingly slow internet to the point that it was unworkable. As they were in a predominantly business, not residential area, there was no fibre broadband available so they had to buy a dedicated circuit at a cost of almost £300 a month compared to the £20 a month they were paying for the internet.

The sad fact is; this is not uncommon. The EEF, the manufacturers association, in a recent survey said their small business members were paying an average of £5,000 a year to get decent broadband.

This makes the Ofcom decision not to break Openreach away from BT all the more frustrating. Ofcom found that Openreach was favouring residential customers over business ones. Most residential areas have access to fibre as BT can make money there from selling multiple connections and its TV Sports services. It also makes good money on the bigger data connections that smaller businesses wanting to go to the cloud have to take. So there is little incentive to ensure that SMEs have access to fibre/superfast connections.

Similarly, BT has been incredibly slow to roll out FTTP/FTTH (fibre to the Premise/Home).

Most of Eastern Europe and Scandinavia are years ahead of us. The lack of infrastructure could well inhibit UK’s economic growth. It is certainly raising costs for all businesses, which translates into more profits for BT – at the last count they were almost £10 million a day.

In summary, without doubt we are heading towards everything being in the cloud. But small businesses should ensure that before they are swept along in the rush, they have checked that their broadband capacity will support it or that with the extra costs, should it need improving, the business case still stacks up.